Armenian government commission to assess extent of country’s shadow economy

The Armenian government has created a commission in order to assess the size of the country’s shadow economy.

Experts will study around 20 different industries, after which the State Revenue Committee will come up with a strategy to incorporate these sectors into the country’s body of tax-paying subjects and legal entities.

The Armenian authorities currently have difficulty in assessing the extent of the country’s shadow economy.

“It’s impossible to assess the scale [of it] in just two months. This is the first time that such a project will be carried out,” said David Ananyan, the head of the State Revenue Committee of Armenia.

However, some economists have put forward several theories on how much money the state treasury loses per year because of the shadow economy. Economist Hrant Mikaelyan says that 30 per cent of the nation’s GDP consists of economic transactions carried out within the shadow economy. This could account for some USD 2.6 billion per year.

“This is of course less than at the beginning of the 2000s when the shadow economy accounted for 80 per cent of all trade transactions. However, this indicator is still very high. Next on the list will most likely be service providers and construction companies.”

Hrant Mikaelan says that in developed countries such as Denmark, this indicator falls to between four and eight per cent. In the US it is about 10 per cent, while in Belgium it accounts for 16-18 per cent of trade transactions. In developing countries, this indicator can be anywhere between 15 and 70 per cent.

Mikaelan says that results could take a while as it will initially be difficult to ‘expose’ the activities of the current shadow economy.

“The lower the percentage, the harder it is to fight the shadow economy. A GDP of 24 per cent would be a positive result for Armenia. Later, the administrative costs of this ‘fight’ will exceed the income received. We can’t go after every grandmother who doesn’t pay her taxes.”